Business Interruption insurance* is an important form of insurance that can generally be selected as an add-on to material damage coverage in some situations it could be the difference between your business surviving and failing, and yet many companies don’t have it.
Why does my business need to consider Business Interruption insurance?
Generally, businesses will make sure that they have insured their premises, contents and their stock against insurable events like accidental damages, burglary, fire, and weather damage, but they sometimes don’t think about the disruption that business interruption could cause to their cash flow.
If your premises burnt to the ground, how quickly could you find a new place to relocate to? Or take the time to imagine if all your stock was ruined in a storm, how quickly could you source new stock? In these sort of circumstances, the days, weeks or possibly months you are unable to operate either fully or at all will cause severe disruption to your business cash flow, a drama you could live without.
What does Business Interruption insurance cover?
Business interruption insurance provides cover for the loss of income caused by a specified insured event (such as property damage or fire). It is also designed to assist your business to recover from an insured event by paying ongoing expenses (such as continuous expenses such as equipment leases or rent).
Research has demonstrated that nearly three quarters of businesses will fail if they experience substantial losses through fire, weather events, etc and do not have a sufficient business interruption cover in place. This type of insurance can easily be added to most standard policies and you might really want to ask yourself whether you can afford not to have it.
Extra cover options
As well as covering income , you can also choose to cover Additional Increase Cost Of Working and Claims Preparation Costs.. This optional coverage helps to cover costs you incur whilst trying to get your business back up and running. For example, a rental on temporary premises whilst your main premises are rebuilt and other costs of temporarily hiring additional equipment.
There is also the optional extension for Earthquake/Natural Disaster Cover.
Coverage caused by earthquake, subterranean fire, volcanic activity, tsunami, geothermal activity, hydrothermal activity or fire caused by any of these is not included as standard with your Business Interruption insurance policy.
This coverage can be purchased as an optional extension for both Material Damage and Business Interruption policies.
How much does Business Interruption insurance cost?
Business interruption insurance costs can vary depending on a variety of things like the amount of cover you need, location, construction, fire/security protection and the type of business you run. Some people may regard this type of insurance as unnecessary. But if you calculate how long your business could survive without operating, it’s easy to see the kind of peace and mind and protection this coverage can provide to help get your business back up and going.
This type of insurance can also be surprisingly simple to arrange and doesn’t need to cost a fortune. As with every form of insurance, the best way to calculate what you require is to speak to chat with our team at BizCover to get an idea on the type of cover available.
How much Business Interruption insurance coverage does my business need?
Spend some time understanding the costs that are involved with running your business to ensure that you are protecting it adequately. You should also consider what additional costs there may be in rebuilding your business, for example leasing temporary premises or additional equipment.
A Business Interruption claim examples^
The owner of a convenience store purchased cover for their contents and also purchased Business Interruption coverage.
Unfortunately there was a fire originating in a neighbouring business which caused significant damage to their store.
This impacted their business, and they could not reopen for three months. While their Contents insurance would pay for replacing the equipment and fit-out, with no income coming in they still had the rent, staff and other committed expenses to take care of.
Thankfully, they also had a Business Interruption insurance policy which provided progress payments to supply cash flow and replace earnings from business lost. This allowed the insured to pay their fixed costs that continued accruing after trading stopped.
Holly is the owner of a clothing retailing business and owns the premises they operate from. Holly has cover in place for the Building, Contents and also purchased Business Interruption coverage*. Holly did not take the optional extension for earthquake/natural disaster because the price was more expensive.
One morning there was an earthquake which caused structural damage to Holly’s store.
Unfortunately because Holly did not purchase the optional extension for earthquake/natural disaster she was not covered for the damage to her store.
Hopefully all of the above will be helpful to you as you search for a Business Interruption insurance policy that will give you the peace of mind you need when you are dealing with the complexities of running your own business. If you would like more information about Business Interruption insurance, visit https://www.bizcover.co.nz/business-insurance/
* This information is a general guide only and does not take into account your objectives, financial situation or needs. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.
^The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Cover for a claim will depend on the specific circumstances around the loss and would be subject to the terms and conditions of the policy concerned.